Bank of Japan Rolls Out Bold Easing Program to Jumpstart Economy

By: Allison Jackson

Published: April 5, 2013

The Bank of Japan (BOJ) has pledged to ramp up its asset-buying program as part of an aggressive stimulus package, in the latest effort by a major central bank to loosen monetary policy and spur economic growth.

Newly appointed Governor Haruhiko Kuroda committed the BOJ to buying about ¥84 trillion of Japanese government bonds this year – the equivalent of 17 percent of GDP – dwarfing its previous target of ¥46 trillion yen.

The central bank will also extend the average maturity of government debt to seven years from three years and increase its purchases of exchange-traded funds and real estate investment trusts.

“This is an unprecedented degree of monetary easing,” Kuroda told a news conference after the BOJ policy meeting, according to Reuters.

“We took all available steps we can think of. I’m confident that all necessary measures to achieve 2 percent inflation in two years were taken today,” he said.

The size of the stimulus package surprised market observers and showed that Kuroda, who replaced Masaaki Shirakawa in March, was determined to make good on his promise to achieve the inflation target announced in January.

“The timing was a surprise and the magnitude was more than expected,” Credit Suisse analysts Hiromichi Shirakawa and Takashi Shiono said in a report entitled “New BOJ, But Old-Fashioned QE.”

“The key question to be asked is whether this aggressive government debt monetization will really be able to push up inflation rates,” the two analysts said.

The measures have depressed the value of their currencies and drawn sharp criticism from emerging market economies, which claim the leading industrialized nations are manipulating their currencies to gain a trade advantage.